CS Shikha Mehra

CS Shikha MehraAUTHORISED MONEY CHANGERS (AMC) :

An AMC is a Full Fledged Money Changer (FFMC) authorised by the Reserve Bank to deal in foreign exchange for specified purposes.

DIFFERENT TYPES OF AMCs :

The different types of AMCs are:-

(i) Authorised Dealer Category -I Banks (AD Category–I Banks),

(ii) Authorised Dealers Category – II (ADs Category–II)

(iii) Full Fledged Money Changers (FFMCs)

WHETHER LICENSE MANDATORY FOR AMCs:

Yes. No person shall carry on or advertise that he carries on money changing business unless he is in possession of a valid money changer’s licence issued by the Reserve Bank. Any person found undertaking money changing business without a valid licence is liable to be penalised.

REQUIREMENTS TO APPLY FOR FFMC LICENCE:

(i) The applicant has to be a company registered under the Companies Act, 1956/2013.

(ii) The minimum Net Owned Funds (NOF) required for consideration as FFMC is Rs.25 lakh for Single branch FFMC and Rs.50 lakh for Multiple branch FFMC

♣ Net Owned Funds (other than banks):

Owned Funds : (Paid-up Equity Capital + Free reserves + Credit balance in Profit & Loss A/c) minus (Accumulated balance of loss, Deferred revenue expenditure and Other intangible assets)

Net Owned Funds: Owned funds minus the amount of investments in shares of its subsidiaries, companies in the same group, all (other) non-banking financial companies as also the book value of debentures, bonds, outstanding loans and advances made to and deposits with its subsidiaries and companies in the same group in excess of 10 per cent of the Owned funds.

♣ AMCs are expected to maintain the minimum NOF on an ongoing basis.

FRANCHISEE(S) CAN ALSO CARRY ON THE BUSINESS OF AMCs SUBJECT TO FRANCHISEE AGREEMENT & RBI REGULATIONS:

Franchisee:

A franchisee can be any entity which has a place of business and a minimum Net Owned Funds of Rs. 10 lakhs. Franchisees can undertake only restricted money changing business.

Franchisee Agreement :

AD Category – I banks, ADs Category – II and FFMCs as the Franchisers are free to decide on the tenor of the arrangement as also the commission or fee through mutual agreement with the franchisee. The Franchisee agreement to be entered into should include the following conditions:

(a) The franchisees should display the names of their franchisers, exchange rates and that they are authorized only to purchase foreign currency prominently in their offices. Exchange Rate for conversion of foreign currency into Rupees should be the same or close to the daily exchange rate charged by the AD Category – I Bank / AD Category – II / FFMC at its branches.

(b) The foreign currency purchased by the franchisee should be surrendered only to its franchiser within 7 working days from the date of purchase.

(c) The franchisee should maintain proper records of transactions.

(d) The on-site inspection of the franchisee by the franchiser should be conducted at least once a year.

PROCEDURE FOR SUBMISSION OF APPLICATION TO THE RESERVE BANK FOR APPOINTMENT OF FRANCHISEES:

  • An AD Category – I bank/ AD Category – II/ FFMC should apply to the respective Regional Office of the Reserve Bank, inForm RMC-F for appointment of franchisees under this Scheme.
  • The application should be accompanied by a declaration that while selecting the franchisees, adequate due diligence has been carried out and that such entities have undertaken to comply with all the provisions of the franchising agreement and prevailing Reserve Bank regulations regarding money changing.
  • Approval would be granted by the Reserve Bank for the first franchisee arrangement. Thereafter, as and when new franchisee agreements are entered into, these would have to be reported to the Reserve Bank inForm RMC-F on a post-facto basis, along with similar declaration as indicated above.

CHECKS TO BE ENSURED BY AD CATEGORY-I BANKS/ADS CATEGORY-II/FFMCS WHILE CONDUCTING DUE DILIGENCE OF FRANCHISEES BEFORE APPOINTING THEM:

The AD Category – I banks / ADs Category – II / FFMCs should undertake the following minimum checks while conducting the due diligence of the franchisees:

  • existing business activities of the franchisee and its position in the area.
  • minimum Net Owned Funds of the franchisee.
  • Shop & Establishment / other applicable municipal certification in favour of the franchisee.
  • Verification of physical existence of location of the franchisee, where restricted money changing activities will be conducted.
  • Conduct certificate of the franchisee from the local police authorities (certified copy of Memorandum and Articles of Association and Certificate of Incorporation in lieu of conduct certificate in respect of franchisees which are incorporated entities.
  • Declaration regarding past criminal cases, if any, and cases initiated / pending against the franchisee or its directors / partners by any law enforcing agency, if any.
  • PAN Card of the franchisee and its directors / partners.
  • Photographs of the directors / partners and the key persons of franchisee.

The above checks should be done on a regular basis, at least once in a year. The AD Category – I banks / ADs Category – II / FFMCs should obtain from the franchisees proper documentary evidence confirming the location of the franchisees in addition to personal visits to the site. The AD Category – I Banks/ ADs Category – II / FFMCs should also obtain a Chartered Accountant’s certificate confirming the maintenance of the Net Owned Funds of the franchisees, i.e. Rs. 10 lakh on an ongoing basis.

CRITERIA FOR SELECTION OF CENTRES:

The AD Category – I banks / AD Category – II / FFMCs may appoint franchisees within a distance of 100 kms. from their controlling branches concerned.

GUIDELINES IN RESPECT OF REPORTING, AUDIT AND INSPECTION OF FRANCHISEES:

  • The franchisers i.e. the AD Category – I banks / ADs Category – II / FFMCs are expected to ensure that franchisees put in place adequate arrangements for reporting of transactions by the franchisees to the franchisers on a regular basis (at least monthly).
  • Regular spot audits of all locations of franchisees, at least once in six months, should be conducted by AD Category – I Banks / ADs Category – II / FFMCs. Such audits should involve a dedicated team and‘mystery customer’ (Individuals acting as potential customers to experience and measure the extent up to which people and processes perform as they should) concept should be used to test the compliance level of the franchisees.
  • A system of annual inspection of the books of the franchisees should also be put in place.

The purpose of such inspection is to ensure that the money changing business is being carried out by the franchisees in conformity with the terms of the agreement and prevailing Reserve Bank guidelines and that necessary records are being maintained by the franchisees.

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